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Migration and Economic Development in Socialist Yugoslavia

This article is based on a talk at the Polanyi Center, Corvinus University, Budapest, on March 2, 2016

In 1971 the Yugoslav economic Ivo Vinski published an assessment of the Gastarbeiter’s economic contribution to Yugoslavia. Vinski calculated that the average Yugoslav worker in Germany produced a net product worth of 1,250 German Marks. 400 of that were profits for the employer as well as taxes and social security contributions. Out of the remaining salary, the average Gastarbeiter spent 440 Marks on his (or her) subsistence in Germany; that is, money spent in Germany. He (or she) saved 410 Marks, out of with 145 Marks were put on a savings account at a bank in Germany and 265 Marks repatriated to Yugoslavia. Summing up, Vinski concluded that four fifths of the added value produced by the Gastarbeiter benefitted the German, that is, a capitalist economy and only one fifth the Yugoslav one. If the costs of schooling and training were factored in, Yugoslavia’s balance of the Gastarbeiter economy would even be negative.[1]

„How much a Yugoslav worker abroad values“

Vinski was not a lone voice. In the early 1970s, Yugoslav social scientists began to take stock of the economic and social consequences of the massive emigration of workers to Western Europe which had started a decade earlier. By 1971, an estimated one million Yugoslav workers were employed abroad. Yugoslav scholars were interested, among others, in the question whether Yugoslavia’s economy really benefitted from labor emigration. Most studies came to negative conclusions: experts spoke of the consequences of the economic migration as “modernization without development.” Marxist social scientists described the Gastarbeiters as an industrial reserve army for the capitalist economy.[2] So, it seems that labor migration to the West, which was one of the major hallmarks of Yugoslav socialism, was another ambitious project that ultimately failed.

In this article will focus on the effects of labor migration on the domestic economy of Yugoslavia. This is a story that involves different actors, all with their own agendas and interests: migrants and their families, the party and the state. The state was no monolithic agent at all in this story. On the contrary, statehood in socialist Yugoslavia was very heterogeneous and fragmented. Not only federal and republican governments often differed in their policy orientation; local self-government and the manifold organizations of self-management pursued their own policies too. This is why the vector of central government initiatives was often diverged by lower level authorities – and by the migrants, who displayed their own agency.

But why socialist Yugoslavia, that is, a state that is not with us anymore? Is there anything that we can learn from it? I do think that the historical study of migration can help us better understanding current dynamics and challenges, highlighting especially the importance of time. Yugoslavia offers unique insights because hardly any other emigration country at that time produced so much research on the domestic effects of emigration. Yugoslav social science research on labor migration in the 1970s and 1980s was methodologically sophisticated, on par with its “Western” peers.[3] This is an important and not-self-evident point because research about migration is very much tilted towards immigration. This clearly is the result of global hierarchies of knowledge production that reflect economic inequalities. It is the countries of immigration that typically can afford extensive research into migration, and these are mainly interested in the consequences of in-migration. Out-migration and its effects on sending countries receive much less attention.

Migration and Development

In September 2006, the United Nations General Assembly hold the “High-Level Dialogue on International Migration and Development”. It was opened by a speech by the then Secretary-General of the United Nations, Kofi Annan, who said:

“More and more people are excited about the ways in which migrants can help transform their adopted and their native countries. More and more people understand that governments can cooperate to create triple wins – for migrants, for their countries of origin, and for the societies that receive them. (…) The evidence on migration’s potential benefits is mounting. With their remittances reaching an estimated 167 billion dollars last year, the amount of money migrants from the developing world send back to their families exceeds the total of all international aid combined. And money is far from being the whole story. Migrants also use their skills and know-how to transfer technology, capital, and institutional knowledge. They inspire new ways of thinking about social and political issues. They form a dynamic human link between cultures, economies, and societies. As a result, we are better positioned than ever to confront the challenges of migration, and seize its opportunities.”[4]

Indeed, more so than any-time in the past, international organizations and national governments are pondering how to turn emigration into an instrument of development. The U.N. has launched the mentioned dialogue, in which some 140 member countries participate, and there is even a Special Representative of the UN Secretary-General for International Migration and Development. The World Bank is commissioning research and runs its own think thank for these questions (http://www.knomad.org/about-us). The Organization for Economic Cooperation and Development runs a similar program (http://www.oecd.org/development/migration-development). Since 2007, the Global Forum on Migration & Development (http://www.gfmd.org/) organizes annual meetings that bring together government representatives, experts and NGO activists in order to discuss action-oriented projects. The International Organization of Migration (https://www.iom.int/migration-and-development) is also active in this field, as are a variety of other development organizations and expert groups.

Thinking about the problem, though, is by no means new. It was already discussed in the context of overseas emigration from Europe in the nineteenth century. In one of the first such analyses, Swedish economist Knut Wicksell in 1882 stressed the positive effects of emigration to America for the economic development of Sweden.[5] Wicksell concluded that emigration had eased overpopulation and therefore reduced the downward pressure on wages; the remittances sent by Swedish emigrants helped to fund industrial development and stimulated the land market. Following his lead, other authors tried to provide further proof for the assumption that emigration was a major contributing factor for Sweden’s industrial takeoff. The upturn in Italy’s economic development before World War One was also said to have been greatly facilitated by overseas emigration.[6] Contemporary observers of overseas emigration from East Central and Southeastern Europe before 1914 noted many beneficial effects of emigration on local communities as well.[7] Families of migrants built new houses, bought additional land and cattle, and invested in farming tools, and migrant remittances helped to balance national accounts. Yet, more recent economic history research, while acknowledging the positive income effects on the household level, has questioned the contribution of emigration to overall economic development. For the particularly well-documented case of Sweden, for example, Urban Karlström concluded in his 1985 dissertation that “Factors other than the transatlantic migration determined the process of growth.”[8]

Nowadays, economic research on the developmental effects of migration focuses on remittances. This is in line with the interest of governments who see enormous amounts of money flowing into their countries – money, they cannot easily tax. However, economists do not agree on the developmental balance of migrant transfers. The mainstream view seems to be that migrant transfers help to alleviate poverty but do little to overcome underdevelopment.[9] Remittances stimulate household consumption but generate also downside effects, for example by reducing labor participation rates and encouraging rent seeking. They often result in an increase of imports and might create an upward pressure on local currencies. A general conclusion is that the economic consequences of emigration on the sending country are highly context-sensitive. Depending on prevailing conditions, emigration might render different effects, and these are hard to steer by government initiative. Such a conclusion delights the historian, who has a natural aversion against abstract models: if context matters so much, each case must be studied in its own right.

Labor migration from Yugoslavia

When assessing the consequences of labor migration on the Yugoslav economy, one should keep in mind the intentions of the government, as these directed the state’s response. This also helps to identify processes that were beyond the government’s control. The very fact that citizens could leave Yugoslavia in order to take work in Western countries is astonishing: Yugoslavia was the only socialist country to do so on a massive scale. Why did the government open its door to emigration in 1963/64 in the first place?[10]

There were several reasons which can be grouped in two categories: first, pressures from below; second, state development goals.

Yugoslavia, and especially its northernmost – and most developed – republics (Slovenia and Croatia) had seen a growing number of citizens who went abroad to take work illegally since the mid-1950s. The federal government estimated the number of Yugoslav citizens working abroad at 140,000 by the end of 1963, that is, before it started to organize the departure of workers. Most of these had left without proper permission. There were even cases of local communities who sent their unemployed to Western Europe. So, the government faced a two-way choice in face of a growing numbers of illicit departures: either to enforce the existing restriction or to change them.[11]

After acrimonious debates in high and low party organs, the government decided to change the legal framework in order to liberalize taking work abroad. Those voices who stressed the economic benefits of labor migration prevailed. Their argument must be seen before the background of two processes: Yugoslav experts had already taken notice of the significant money inflows from the “old emigration”, that is, emigrants who had left before socialist Yugoslavia was created. Furthermore, at that time Yugoslavia experienced a growth in unemployment (which would never disappear again), caused by market-oriented economic reforms of first half of the 1960s. These led to a cut-back in state investments in industry and a greater stress on profitability. Many factories reduced their workforce – exactly at a time, when many villagers and the first post-war baby-boomers entered the urban labor market. The government hoped that by exporting labor, pressures on the domestic job market would ease. This implied that the government preferred unemployed workers to leave – one if its goals that would not materialize. Policy makers also had an eye on migrants’ transfers as a potential source of money for domestic investments. And they hoped that migrants would return with new know-how and skills.

Being a socialist state, Yugoslavia did not want to entrust the dynamics of labor migration on market forces alone. The idea was that the government Labor Office would act as the mediator between foreign employers and Yugoslav workers. This was another failed ambition: eventually less than half of the Gastarbeiters got contract through the Labor Office. Most left either on their own initiative, assisted by kin, friends and neighbors already abroad, or were directly recruited in Yugoslavia by foreign employers. Another important expectation, which did not really become true, was the temporary nature of the stay abroad. In that, the intentions of the governments of Yugoslavia and the receiving countries converged. This is reflected in the official terminology in Yugoslavia: the migrant workers were called “temporarily employed abroad” – and not “emigrants”. For maintaining control over the whole process, Yugoslavia concluded bilateral recruitment treaties, the first one with France in 1965, the most important one with Germany in 1968 – after many Yugoslavs had already gone there.[12] These treaties were based on the principle of rotation: workers would sign a labor contract for few years, return and be replaced by new workers, if conditions allowed.

The Yugoslav government had expected the whole migration process to be of a temporary nature: as soon as the domestic economy would recover, workers would cease to go abroad. Yet, apart from the fact that unemployment would not go away, and that the differences in wage levels between Yugoslavia and Western Europe remained very high, the government also failed to reckon with the cumulative effects of migration. Once networks were established, migration continued even if its initial causes had disappeared. Emulation also played an important role in migration systems tending to reproduce themselves. The Yugoslav government would be faced by a permanent emigration pressure and was, therefore, at the mercy of Western countries to keep their doors to their countries open. As we will see, when these countries implemented a stop on recruitment in the wake of the first oil crisis, this caused great problems for Yugoslavia.

Based on these provisions and conditions, a significant number of Yugoslavs went abroad. The Gastarbeiter census of 1971 counted more than 670,000 workers abroad, yet a more realistic estimate was more than one million;[13] some 60 percent of them were in West Germany, twelve percent in Austria as the second most important receiving country. This means that around five percent of the population of Yugoslavia lived abroad. Even more staggeringly, more than 20 percent of all employed Yugoslavs worked in a foreign country! One reason that made Yugoslav workers so popular among Western employers was the fact that on average, they were better qualified than migrant workers from Southern European and North African countries.

Number of migrant workers, 1971 and 1981

Here is not the space to present a detailed picture of the composition and characteristics of labor migration from Yugoslavia. To highlight few salient features which were also consequential for the economic outcomes of migration as well as the political responses to it:[14]

First, emigration was unevenly distributed throughout the country. Croatia was proportionally affected most, Montenegro least. On the district level differences were even more pronounced. While in some districts, almost 20 percent of the population had left, there were others, where less than one percent left. In the 1970s, the stream of out-migration shifted towards the less developed south. These differences were due to local conditions but also to the question whether there were pre-existing migration patterns. The regional divergence translated into different interests of republican and local governments as for emigration because their constituencies were affected by policy decisions in different ways.

Second, most of the migrants had been employed when they left; only around seven percent were registered as unemployed. The single largest professional group were farmers, which accounted for almost half of the migrants. This means that labor migration was a kind of trans-territorial industrialization – similar to the experience of overseas emigrants from the region before World War One. The overwhelming majority of migrants was young. While most of them were men, a third of the migrant workers were women, which roughly equaled their share in total employment in Yugoslavia. Here the regional differences were striking: while 42 percent of all labor migrants from the Vojvodina were women, they were less than five percent among those from Kosovo.

Number of migrant workers by republic of origin

In the early 1970s, when it became apparent that labor migration did not produce the intended effects, the party-state put forward measures to increase its control. In 1973 the government mandated strict restrictions on the out-migration of qualified workers, as the country began to experience a shortage of them. Labor offices should concentrate on mediating unemployed or unqualified workers from the south of the country. The government also promised to improve domestic conditions so that workers would not need to look for jobs abroad. Yet the prospect of earning three to four times as much as one could in Yugoslavia kept to be a powerful pull.

The effects of remittances

As hoped for by the government, the migrants did send a lot of money home. According to estimates, the net-inflow from migrants surpassed 1.5 billion US-$ annually by the mid-1970s. In 1980 remittances amounted to 4.1 billion US-$. According to official data they constituted between six and eight percent of the total national income in the 1970s until the mid-1980s, thus contributing more to Yugoslavia’s economy than international tourism. Yet, to the government’s dismay, it was mostly the migrants and their families who decided about the expenditure of this money.[15]

What did migrants want to achieve with their earnings? In a representative survey among migrants from Croatia in 1970, the most frequently stated ambition was to solve the housing problem back home, as Yugoslavia was facing a severe housing crisis. More than half of the polled Gastarbeiters called this their main priority. Eleven percent wanted to use their savings primarily for everyday needs or to buy a car, and the same percentage intended to invest in their farm. Only three percent wanted to start a business. Real expenses tilted even more towards housing and cars. In their native villages, migrants built new and big houses, which often remained uninhabited for most of the year. Houses and German cars became important means of prestige and status and triggered further migration, as only a migrant income was sufficient to purchase these goods.[16]

Government experts deplored that little of the money went into productive investments. They developed schemes to divert migrant money into areas that the government could control. Yugoslav banks, for example, offered high interest on bank accounts in hard currencies. A 1972 law enabled private investments in public companies, which offered not only interest payments but also promised the migrant a job upon return. As Jenny Winterhagen showed in her detailed case study of the municipality of Imotski in Dalmatia, which had the highest emigration rate of all municipalities in the country, local governments were quite imaginative in finding ways to make migrants pay for local development. Imotski used the local newspaper to remind their migrants of their moral obligations to their native community and to exert social pressure, for example by publishing lists of financial donations by migrants. Municipalities also organized local referenda for the so-called samodoprinos, that is, voluntary extra-tax payments by the local population for communal purposes. In emigrant communities, many local roads and water pipes, school buildings and church towers were repaired thanks to money coming from migrant workers.[17]

Yet, investments in business remained rare. There were too many obstacles; after all, Yugoslavia continued to be a country run by communists. Farmers, for example, were not allowed to own more than 15 hectares of land, and private businesses faced severe restrictions on the potential to employ wage labor. Even investments in farming machinery were often not very efficient. The Yugoslav sociologist Živo Tanić spoke of an inflation of tractors, many of them of little use given the small size of farms. Investments into small business were often closely related to, and therefore dependent on the needs of migrants, for example in local transportation mini-companies.[18] Such investments created little in terms of added value. Ironically, it seems that remittances obstructed a more organic socio-economic development: they ameliorated living conditions in the countryside, though without really developing it. It can be argued that out-migration slowed down the process of de-agrarianization of Yugoslavia, which by the end of socialism significantly lagged behind Romania and Bulgaria in terms of urbanization.

Yugoslav and foreign observers at that time, like the Danish ethnologist Carl Schierup, pointed to other negative effects of emigration and remittances, especially in the village.[19] Young people developed a disdain for farming work and for jobs in the social sector, as these did not pay enough to satisfy their newly raised consumer desires. The whole economic morale was said to shift from production to consumption. Prestige competition undermined socialist values and facilitated individualism. Even local marriage preferences changed, as girls began to fall for the sons of migrants who boasted of Western consumer goods, rather than the penniless local young teacher or agronomist. Yugoslavia was also a pretty normal country, as these effects have been described in many an emigrant community throughout the world. Remittances generated also tensions on the level of high politics: the Croatian government was unhappy with the distribution of foreign currency, remitted by migrants, as Croatia’s share of migrant transfers allocated by the National Bank was less than of its share among the number of migrant workers.

The economics and politics of return

One of the most peculiar migrant institutions in Yugoslavia were so-called devizne fabrike (“hard currency factories”).[20] These were enterprises, which were either created or extended by investments of migrants, who put savings together and by that attracted additional bank credit. One of the first such factories, which became well known also thanks to a 1974 documentary by German public television, was Pionirka, a textile factory in the village of Aržano in the Dalmatian hinterland. While Pionirka mainly served to create jobs for the non-migrant women of migrants who had remained at home, the general purpose of most of the two dozen or so of these “hard currency” factories was to provide jobs for returnees. They were a powerful manifestation of another major goal of Yugoslav migration policies: to facilitate the return of the Gastarbeiters.

Return became a major issue by the early 1970s, when the government was forced to acknowledge that fewer migrants had returned than expected. Most migrants stayed much longer, and eventually forever, rather than the three to four years as initially envisioned. At the same time, the stop on recruitment by Western countries in 1973 and 1974 and their goal to repatriate migrant workers were thought to lead to a significant return movement. Return was seen as essential by the Yugoslav government, for ideological, economic and social reasons. The communist government did not want to tolerate the permanent stay of workers abroad, which was a steady manifestation of less than glory living conditions in Yugoslavia. They also feared for the workers’ loyalty and identification with Yugoslavia if they stayed abroad too long. Economists were concerned about shortages of qualified labor.[21] They hoped that returned workers would contribute new skills.

Hence, Yugoslavia enacted programs for the facilitation of return, some of them with support by the OECD. In 1973 and 1974 legislation and so-called “Social Agreements” were passed in order to support the return of Yugoslav citizens. These enjoyed, for example, exemptions from duties for repatriated belongings and capital goods. Local labor offices and self-government institutions were urged to treat the return migrants equally to the non-migrant population, and all institutions were called upon to create conditions conducive for return. The government published information brochures on job and investment opportunities in Yugoslavia. Experts estimated that 500,000 new jobs could be created if returnees invest in enterprises, which is why they were offered tax-breaks. Yugoslavia also initiated return programs with receiving countries, such as Germany and the Netherlands, and in the mid-1980s it received millions of US-$ from the Council of Europe and the European Community specifically for job creation for return migrants.[22]

These measures, though, appear to have been insufficient: most Gastarbeiters did not return.[23] In Germany in the mid-1980s, for example, around 80 percent of all Yugoslavs had been living there for already more than ten years. Unfortunately we lack good numbers on return. According to the 1981 census, between 1965 and 1981 some 283,000 migrants returned, and more than 100,000 in the 1980s. Yugoslav experts give higher estimates, which do not seem credible. Given Yugoslavia’s increasing economic woes in the 1980s as well as the ensuing political crisis, it is hard to imagine that more people came back. There were also evident shortcomings in the execution of the government’s return policies on the local level. A study published in 1987 asserted that four firth of all municipalities and enterprises did not implement any return programs, mainly because they did not even know about them (this sounds reasonable in view of the fact that at that time, there existed more than 90,000 organs of self-management). Local authorities also often considered return migrants competitors for scarce resources, such as jobs and housing, which is why returnees often faced hostile attitudes. Local communists were not happy to encourage private business – after all, they did not believe in private business.[24]

„Return from Abroad“ (Oslobodjenie, 20 May 1970)

Conclusion

The Gastarbeiter migration from Yugoslavia, the result of a bold decision by a communist government, generated momentous economic consequences. Yet, these did not meet the initial development goals of the government and its experts. Migrant workers were said to invest their savings unwisely, that is mainly for consumption. When they put up new businesses, these were often considered not to be efficient. Many of the migrants came from the countryside, yet their savings did little to modernize agriculture, and even helped to discourage young village folks from getting decent education. Migration also increased regional disparities and thus tensions.

So, were the migrants to blame, as policy makers and experts did, for the failure of the political intentions to come true? I would rather say that, first, these expectations were unrealistic. They were predicated upon a political disposition, not alien to the modern state in general and particularly inherent to communist governments, that experts know better than the “ordinary folks” what to do with their money. Yugoslavia was a socialist country, which means that economic development should follow a plan and migrants should somehow fit into that as well. Yugoslavia, though, was also an extremely decentralized and heterogeneous country, which is why any policy initiative from above was fractured by the multitude of self-governing institutions on different levels of power. What we see is the clash between two different epistemologies: of policy actors, whose frame of mind was strongly shaped by etatism, on the one hand. And of migrants, whose actions were based on notions of family welfare and community pressures on the other. This clash was mediated by social agents on intermediary levels of action, who had their own perceptions and expectations, such as local governments.

Gastarbeiter houses in east Serbia

To control migration is a huge challenge, even for an autocratic state. By definition, international migration means leaving the purview of government and jurisdiction of a state. Hence, for a communist government prone to control, the management of migration must always have resulted in disappointment. Migrants could prove pretty stubborn in realizing their ideas, as against those of the government. The Yugoslav government was much keener than governments of other sending countries to organize and steer migration, yet it failed as well. One reason of the failure was that it could never change the underlying political and economic conditions. Why should migrants invest in private business and farming, if the government maintained strict restrictions on these? Why not build lavish houses instead, if social prestige could be more easily earned through them than an entrepreneurial career which would provoke suspicion by the local authorities? Yugoslav migrants behaved in a rational way, if seen before the background of their moral economies as well as the prevailing conditions in the country, which they government ultimately failed to rectify.

Finally, on a more general level, the Yugoslav experience shows that labor migration is not a way out of under-development. Migration can even generate lock-in effects as for the position of a country in the global division of labor. Even a socialist country had to make this experience. Migration is an important, and often the only, option for people under economic stress to improve their livelihoods. Yet it would be difficult to pinpoint a country which moved from a peripheral position to the wealth core mainly thanks to labor emigration. On the contrary, since migration and migrant transfers serve as convenient safety valves, they can make governments complacent, rather than forcing them to implement structural reforms. They provide a lifeline for economies in distress even without the government doing anything for the population –except of keeping its doors open for out-migration. This is a risky strategy, as it depends on open doors for in-migration somewhere else.

[22] See the unpublished PhD dissertation of Sara Bernard: The Return of the ‘Gastarbeiter’ in Socialist Yugoslavia 1965-1991. How Return Migration Shaped Yugoslav Strategies of Development, Social Change and Narratives of Identity. University of Regensburg, 2016.